Mozambique LNG Terminal

From Global Energy Monitor
This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.
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Mozambique LNG Terminal is a proposed LNG terminal in Cabo Delgado Province, Mozambique.

Location

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Project Details

  • Parent: Total (26.5%), Mitsui (20%), ENH (15%), ONGC (10%), Bharat PetroResources (a subsidiary of Bharat Petroleum Corporation Limited, 10%), PTTEP (a subsidiary of PTT Public Company Limited, 8.5%), and Oil India (10%)[1]
  • Location: Cabo Delgado Province, Mozambique
  • Coordinates: -10.807908, 40.796899 (approximate)
  • Capacity: 12.9 mtpa (6.45 mtpa per train)[2]
  • Status: Construction[2]
  • Type: Export
  • Trains: 2[1]
  • Start Year: 2024
  • Financing: US$14.9 billion in loans from the African Development Bank, eight export credit agencies and 19 commercial banks,[3] and an additional US$400 million in guarantees and direct lending from the African Export-Import Bank[4]

Expansion Project Details

  • Parent: Total (26.5%), Mitsui (20%), ENH (15%), ONGC (10%), Bharat PetroResources (10%), PTTEP (8.5%), and Oil India (10%)[1]
  • Location: Cabo Delgado Province, Mozambique
  • Coordinates: -10.807908, 40.796899 (approximate)
  • Capacity:
  • Status: Proposed[1]
  • Type: Export
  • Trains: 2[1]
  • Start Year:

Background

Mozambique LNG Terminal is a proposed onshore LNG terminal in Cabo Delgado Province, Mozambique. The project was initially two separate projects, Anadarko's Mozambique LNG Terminal and Eni's Mozambique LNG Terminal, which were combined into one. It will be comprised of four trains each with 5 million tons per annum, with a possible expansion to ten trains each with 5 million tons per annum.[5]

The discovery of large offshore gas reserves in East Africa prompted multiple liquefaction proposals in Mozambique. The International Gas Union reported that these Mozambique proposed projects amount to 53.4 MTPA.[6]

According to the International Group of Liquefied Natural Gas Importers' 2020 Annual Report and the International Gas Union's 2020 Report, there are two trains under construction with a plan to add two more trains at a later date.[1][2]

Insurgency in Cabo Delgado Province

Since October 2017 there has been an ongoing conflict in Cabo Delgado Province, northern Mozambique, mainly fought between Islamist militants attempting to establish an Islamic state in the region, and Mozambican security forces. The government has also hired private paramilitary organisations from Russia, the United States, South Africa and France as its forces have struggled to defeat the insurgency which has resulted in the deaths of at least 1,100 people, predominantly among local communities, and the displacement of over 100,000 people. The growing militarisation of the area is, say government critics, prioritising the protection of the major gas infrastructure under development in the region at the expense of local communities. On April 7, 2020, journalist Ibrahimo Abu Mbaruco went missing after texting a colleague to say that soldiers were approaching him. The major gas operators have paid the Mozambican government to mobilise more armed forces to protect them.[7]

Although the LNG projects in the northeast corner of Cabo Delgado have so far avoided being directly attacked, the likelihood that they will be hit is increasing, and their presence is increasing tension in the conflict zone. Despite the Mozambican military presence to protect the gas projects, insurgents have launched three attacks within seven kilometres of what is now the Total camp on the Afungi peninsula, most recently in August 2019.[8] In a May 2020 report, the Norwegian development research organisation Chr. Michelson Institute described the deteriorating situation as being tantamount to no longer an insurgency but "a war". The report warned that the LNG projects in the region might “come to a halt due to attacks and high security overheads, and thus, operational costs or would at least become substantially reduced”.[9]

On the weekend of June 27, 2020, just days before the anticipated high profile finance signing ceremony for Mozambique LNG, Reuters reported a 'very violent' attack made by insurgents on the town of Mocimboa da Praia, 40 miles south of the project. The town’s port is used for cargo deliveries to the gas developments. Reuters also noted that earlier this year aid agency Medicins Sans Frontieres halted its operations in Mocimboa da Praia, as well as in another town in the region, due to the security situation.[10]

Cost and Financing

Bloomberg reported in May 2017 that the Mozambique government's two rival LNG projects, Anadarko Eni Mozambique LNG Terminal and Italy based Eni Coral South FLNG Terminal agreed to a deal allowing them to develop independently, and share onshore liquefaction infrastructure. Bloomberg considers Curtis Island's three plants in Australia (Australia Pacific LNG Terminal, Gladstone LNG Terminal, Queensland Curtis LNG Terminal) as an example of having exorbitant infrastructure duplication that they could have saved $10 billion of extra cost on their combined $70 billion projects.[11]

In June 2019, the state institution Japan Oil, Gas and Metals National Corporation announced that it was providing US$1 billion in equity financing[12] and the Japanese trading company Mitsui & Co., which has a stake in the project, announced it will invest US$2.5 billion.[13]

In August 2019, Anadarko Petroleum Corp, the original project owner, gave formal approval for the construction of the facility, the largest LNG project approved in Africa. Low gas prices led to questioning whether the final investment decision (FID) would be delayed or cancelled, but Anadarko managed to gather enough long-term buyers to support the financing of the project.[14]

In September of 2019, the board of directors of the Export-Import Bank of the United States (EXIM), the official export credit agency of the United States federal government, voted unanimously to authorize a direct loan of up to $5 billion to finance U.S. exports to the Mozambique LNG Project. The borrower is Mozambique LNG1 Financing Company Ltd., which is owned by a group of sponsors, formerly including Anadarko Petroleum Company that was acquired by Occidental Petroleum Corporation in 2019. Occidental is expected to sell the African assets acquired to the multinational oil and gas company, Total S.A. However, the U.S. content requirement of the contract supported by EXIM will continue to apply, and the related EXIM-supported goods and services to the project will be provided by the United States. The LNG to be exported by the Mozambique LNG project is targeted primarily to meet the demand of Asian markets.[15]

Occidental bought out Anadarko Petroleum's shares in 2019. Immediately following that buyout, Total S.A. bought out Occidental's shares of the project and now owns 26.5 percent of the project.[16]

In November 2019, it was announced that the project will get a $400 million loan from the African Development Bank (ADB), with the goal of establishing a fuel-export industry in Mozambique. In addition to the ADB, commercial banks, development finance institutions, and export credit agencies provide senior debt financing for the project. Mozambique is counting on the $23 billion development to revive its economy after struggling to service its debts.[16]

In May 2020, it was reported that the project had secured loan commitments totalling US$15 billion from export credit agencies and commercial banks which would be confirmed at an official signing in June 2020. Initial media reports named Rand Merchant Bank, Standard Bank Group Ltd. and Société Générale as three participants in a banking consortium of approximately 20 commercial banks which are providing loans to the project. Mozambique state-owned newspaper Jornal Noticias also reported that the Japan Bank for International Cooperation will provide a US$3 billion loan.[17] At the same time, EXIM amended its September 2019 commitment of US$5 billion down to US$4.7 billion, and said that rather than financing only the onshore part of the project, approximately US$1.8 billion of the total financing would support the project’s offshore production.[18] Commenting on the finance deal, Douglas Mason of the Eunomix consultancy told Bloomberg: “Security risk for the project and country risk in general has definitely not been taken into account adequately. Mozambique is a fragile state with weak institutional capacity and multiple social and economic fault lines of conflict and instability -- the companies investing in the sector have not shown strong understanding of this.”[19] Ahead of the anticipated finance signing ceremony on June 30, it was reported that the Government of Mozambique has provided Mozambique LNG with a US$2.5 billion state guarantee in lieu of an immediate equity contribution from the state-run National Hydrocarbon Company.[20]

On July 17, 2020, Total confirmed that it had signed agreements with a range of international financial institutions for a total lending package of US$14.9 billion. Nineteen commercial banks are involved in the deal, though Total did not immediately disclose the names of the banks involved or the amounts which they provided. The publicly owned African Development Bank provided a loan and, according to Reuters, the project financing also includes direct and covered loans from eight export credit agencies (ECAs): UK Export Finance (UKEF), the Export Import Bank of the United States (U.S. Ex-Im), Italy’s SACE, the Netherlands’ Atradius, the Export Credit Insurance Corporation of South Africa, Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance, and the Export-Import Bank of Thailand.[3] The Financial Times reported that U.S. Ex-Im had provided a US$5 billion loan for the project and that JBIC had provided a US$3 billion loan.[21] The Guardian reported that UKEF's financial contribution involves loans worth US$300m to British companies working on the project as well as the guaranteeing of loans from commercial banks worth up to US$850m. Friends of the Earth (England, Wales and Northern Ireland) are considering legal action against the UK government for using UK taxpayers' money to fund a project that would “have massive climate impacts”.[22]

Coronavirus Pandemic

As of April 2020, two-thirds of Mozambique’s 28 confirmed cases of the coronavirus (COVID-19) are linked to the project, which has been put under quarantine. The pandemic may be another setback for the project, which is happening concurrently with an increase in the scale and frequency of attacks by Islamic State insurgents.[23]

Articles and resources

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 The LNG Industry: Annual Report 2020, page 38, International Group of Liquefied Natural Gas Importers, accessed April 29, 2020
  2. 2.0 2.1 2.2 2020 World LNG Report, page 102, International Gas Union, April 27, 2020
  3. 3.0 3.1 Dominique Vidalon and Helen Reid, "Total signs $14.9 billion debt financing for huge Mozambique LNG project", Reuters, Jul. 17, 2020
  4. "Mozambique: Afreximbank Commits U.S.$400 Million To Mozambique's LNG Project", allAfrica, Aug. 6, 2020
  5. Anadarko Eni Mozambique LNG Terminal, A Barrel Full, accessed April 2017
  6. "2017 World LNG Report" International Gas Union, Accessed June 20, 2017.
  7. Gas In Mozambique, A Windfall for the Industry, A Curse for the Country: France Thrusts Mozambique into the Fossil Fuel Trap, Friends of the Earth France, Mozambique and International Report, June 2020
  8. 'Cabo Delgado Insurgency Attack Locations', Zitamar News, Nov. 5, 2019.
  9. 'War in resource-rich northern Mozambique – Six scenarios', Chr. Michelson Institute, May 27, 2020.
  10. 'Insurgents stage 'very violent' attack close to gas projects in Mozambique', Reuters, Jun. 27, 2020.
  11. Dan Murtaugh, "Energy Titans Get Schooled in Sharing as Billions Seen Blown," Bloomberg, May 9, 2017.
  12. [http://www.jogmec.go.jp/english/news/release/news_03_000008.html JOGMEC Provides Equity Financing to Mitsui’s LNG Project in the Republic of Mozambique] Japan Oil, Gas and Metals National Corporation press release, Jun. 19, 2019.
  13. Mitsui & Co. to invest up to around $2.5 billion in LNG project in Mozambique The Japan Times, Jun. 20, 2019.
  14. U.S. energy firm Anadarko approves $20 bln LNG export project in this African country CNBC Africa, June 19, 2019.
  15. "EXIM Approves $5 Billion to Finance U.S. Exports to Mozambique LNG Project " Export-Import Bank of the United States, September 26, 2019
  16. 16.0 16.1 Total’s Mozambique LNG project lands $400 million loan, World Oil, November 27, 2019
  17. Total lands $15 billion financing commitment for Mozambique LNG project, World Oil, May 20, 2020
  18. EXIM Board Unanimously Approves Amended Financing of U.S. Exports to Mozambique LNG Project and Support of More U.S. Jobs in Additional States, Export-Import Bank of the United States, May 14, 2020
  19. Mozambique Gas Project Financing Matches Nation’s Economy, Bloomberg, Jun. 5, 2020
  20. Emma Rumney and Helen Reid, Mozambique offers $2.25 bln funding guarantee to LNG project, says report, Reuters, Jun. 22, 2020
  21. Joseph Cotterill and David Keohane, "Total secures Africa's biggest debt financing with LNG deal", Financial Times, Jul. 17, 2020
  22. Jillian Ambrose, "UK could face lawsuit over $1bn aid to Mozambique gas project", The Guardian, Jul. 20, 2020
  23. Borges Nhamire and Paul Burkhardt, Total’s LNG Project Is Mozambique’s Coronavirus Epicenter, Bloomberg, April 14, 2019

Related SourceWatch articles

External resources

Gas In Mozambique, A Windfall for the Industry, A Curse for the Country: France Thrusts Mozambique into the Fossil Fuel Trap, Friends of the Earth France, Mozambique and International Report, June 2020

External articles